Financial markets

If you want to learn how to read the news, the current edition of your favourite newspaper or magazine is not the best place to start. There, you’ll find assumptions, supposed facts, arguments, prejudices and opinions galore, but even if they seem dubious, you’ll often need to wait a long time to take the full measure of the errors. No, the best way to learn how to read the news is by spending time with newspapers and magazines that are long past their recycle date. Read those and see for yourself: almost all of the time almost everybody is completely fucked in the head. Once you’ve got solid confirmation of that most basic of facts about the world, you’re ready to open up (in your browser, of course) the day’s paper.

This is what makes anthologies of dated popular writing so valuable and interesting. Michael Lewis’ recent book Panic is an excellent addition to the genre.* It covers the story of several panics and crashes in the world of finance since the market crash of 1987. The selections for each crisis give an example or two of pre-crash reporting (sometimes eerily prescient, sometimes hilariously backwards), followed by a series of postmortems.

Lewis has been writing about the markets for a while now. He was present as a bond trader during the 1987 crash, and left the financial world afterward to write a smart, funny book about the experience, Liar’s Poker. And luckily for readers of Panic he hasn’t been too modest to omit selections from some of his more recent writing about the financial world. These selections are among the best in the book. In addition to the 1987 crash, Panic covers the Asian currency collapse of the late 90s, the bursting of the dot com bubble, and our most recent mess sparked by the collapse of the subprime mortgage market.

Rounding out the book is a helpful glossary by Chris Benz, one of five interns who helped Lewis put together the selections. The glossary will help orient readers who aren’t quite up on all the financial jargon. In the case of this especially ignorant reader—I don’t really understand yet exactly how even the most basic financial instruments are supposed to work—the glossary wasn’t quite enough to get me through a few of the slightly more technical pieces toward the beginning of the book. But the relentless logic of these crashes is clear enough: building prices, hype, outsized gains for those who get in early, followed by a stampede to the door that is typically cruelest to those latest to join the party. This does not mean that all crashes are created equal. Indeed, the selections are also well chosen in the way they illustrate differences as well. In one especially interesting essay, Lewis argues that the dot com bubble had socially useful benefits that the other bubbles clearly lack.

So, good stuff and probably worth your time.

* A genre which includes the absolutely superb anthologies of mainstream writing about the first and second gulf wars respectively, The Gulf War Reader and The Iraq War Reader, both edited by Micah L. Sifry and Christopher Cerf.